No! They can cover the dividend without a problem IF they reduce the management fees from 2/20 to 1.75/17.5. If they cut the dividend again in the near future, it will be years before the stock goes 3% or more above net asset value.
I am sorry; I was not clear. This stock offering from FSC-the people who buy these 15 million shares, are they also going to get the dividend? The stock goes x-dividend tomorrow, and I was wondering if the buyers of the new stock offering are going to receive that.
Am I correct in saying that the new buyers of the stock will not get the dividend? FSC goes x-dividend tomorrow.
I was worried the company would try to leverage the upcoming dividend into a stock offering this week, but that is now not going to happen. I do not believe we will see another stock offering until the stock trades above $10.30/share.
This morning, FSC is up only slightly ($0.12). This makes me think that a stock offering will be announced after the market closes today!!! Needless to say, the stock price will get hit very hard if this happens.
The stock goes x-dividend on Friday. That means that if they have a stock offering tomorrow in late afternoon, the new buyer at $9.81/share would get a 4 percent discount assuming a 7/8/14 close of $10.21/share. In addition, the new buyer would also receive the current dividend. Remember, management has promised us only that new shares would be priced at most recent NAV or higher. I hope that the stock offering does NOT take place because it would knock our stock price down very, very hard. There is little doubt that management would like very much to do a stock offering; it is a question of WHEN, not IF. As I recall, the last stock offering took place when the share price reached $10.50.
One more thing: A lot of people are wondering how the company can afford to pay the new higher dividend when they just barely covered the existing dividend in the latest quarter. The short answer is that they can NOT afford to do it. My guess is that the management has scaled back its fees from 2.0%/20% to 1.75%/17.5%. That should do it!
PSEC almost certainly sold the loan, at a steep discount, before New Century filed for bankruptcy. Why? Because that way, it does NOT have to record the loan as a non-accrual!
Do we even know that PSEC had the loan in their portfolio at the time that the company filed for bankruptcy? It is possible PSEC sold the loan at a steep discount before the borrower collapsed.
I believe this will continue to sell at a discount to NAV. My guess is that it will not go above $10.30/share. We still do not have a true picture of how well the company is doing, and unfortunately, we now have a much uglier picture of the company's management.
I think this solution is going to leave many people very dissatisfied. We are going to have to wait ONE YEAR to get the restatements, which should have been provided by PSEC immediately. Presumably, we will continue to be charged inflated management fees until 6/30/15, and there will be no rebates offered for previous years.
I did the same thing. I tendered 20 percent a 10.60, 20 percent at 10.65, 20 percent at 10.70, 20 percent at 10.75 and 20 percent at 10.80. All in all, I am pleased at how it worked out. My cost basis is 10.10. From what I understand though, these kinds of 1 off stock buy backs really do not work. The share price is likely to fall back to 10.30-10.35 in the near future, which is what it was before the tender took place.
In the end, I decided to buy shares of FSIC, and to participate in the tender offer.
Any ideas as to how long it will take before we hear back, and what the final price will be?
I am guessing the price will be at least $10.70 per share.
This is all very well, but obviously, the changes are going to have a detrimental effect on SOMEBODY, which is why we still do not have restated financials for 2011, 2012, and 2013.
I did not expect this kind of catastrophic fall. Also, PSEC will have to lower their management fees if they give in to SEC. This is not something they want to do, if they can avoid it.
All we know for certain is that the reputation of PSEC mgmt. has taken a big, big hit. This stock will never again trade at a big premium to net asset value.
In a way, this meltdown is very good news. The reason is that management watches the share price closely.
If they see that a hard nosed attitude vis-a-vis the SEC is devastating the share price, they are a lot more likely to accede the SEC's requests immediately, and get this problem off the table. I would be surprised if this problem still exists 2 weeks from now, let alone 6 to 9 months.
By the way, selling 2/3 of my shares at $10.09 turned out to be a pretty good idea after all.